LIPSTEIN et al v. UNITEDHEALTH GROUP et al
Filing
55
OPINION & ORDER denying 22 Motion to Dismiss Count III as premature at this time, etc.. Signed by Judge Faith S. Hochberg on 11/22/11. (jd, )
NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
__________________________________________
MARK LIPSTEIN,
:
: Civil Case No. 11-1185 (FSH) (PS)
Plaintiff,
:
: OPINION & ORDER
v.
:
: November 22, 2011
UNITED HEALTHCARE INSURANCE
:
:
COMPANY, et al.
:
Defendants.
:
__________________________________________ :
HOCHBERG, District Judge:
I.
INTRODUCTION
Plaintiff, Mark Lipstein, brings this action challenging the determination of benefits
payments for his health care plan, in which defendants serve as a secondary payor to Medicare.
Plaintiff alleges that defendants improperly reduce benefits payments in violation of the
Employee Retirement Income Security Act of 1974 (“ERISA”). The Amended Complaint
contains three counts. In Counts I and II, plaintiff asserts claims for plan benefits under ERISA
§ 502(a)(1)(B), 29 U.S.C. § 1132(a)(1)(B). In Count III, plaintiff seeks equitable relief for an
alleged breach of fiduciary duty by defendants under ERISA § 502(a)(3), 29 U.S.C. §
1132(a)(3). Defendants seek the dismissal of Count III pursuant to Federal Rule of Civil
Procedure 12(b)(6).
II.
ALLEGATIONS
Plaintiff is a participant in a health care plan administered by defendants. Plaintiff’s wife
is a beneficiary under the plan and has received various services from a provider who does not
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accept Medicare. Under the terms of plaintiff’s health care plan, defendants serve as a secondary
payor to Medicare, with the result that defendants are responsible for paying certain benefits
above and beyond the benefit structure provided by Medicare.
Plaintiff alleges that defendants improperly reduce plan payments in situations where a
plan participant receives services from a provider that does not participate in Medicare, by
estimating the amount that Medicare would have paid if the participant had visited a provider
who participated in Medicare. Plaintiff alleges that under his health plan, defendants owe in
benefits the difference between what Medicare actually paid and what defendants would pay to a
traditional subscriber where Medicare is not at issue. Accordingly, plaintiff first contends that
defendants are obligated to pay full benefits when a subscriber visits a provider who does not
accept Medicare. 1 Plaintiff further alleges that even if defendants are entitled to estimate the
amount that Medicare would have paid when a subscriber visits a provider who does not accept
Medicare, they do so improperly by estimating what Medicare would have paid by using billed
charges instead of the Medicare fee schedule and by overstating the percentage of the allowed
amount under the Medicare fee schedule that Medicare would pay. Accordingly, plaintiff
contends that his wife was improperly denied benefits to which she was entitled when defendants
1
This theory of liability would effectively allow a beneficiary participating in a
secondary coverage plan to elect to convert the plan into a primary coverage plan by choosing a
provider who does not participate in Medicare. Plaintiff does not explain how this theory can be
reconciled with plaintiff’s affirmative allegations that under the terms of his plan, the coverage
provided by defendants is secondary to Medicare. See e.g., Amended Complaint at ¶¶ 5, 12-14.
Because this apparent conflict is not squarely addressed by the briefing of the parties, the Court
declines to rule on it at this time, except to note that imposing primary coverage responsibility on
a plan intended to provide only secondary coverage would appear to improperly shift substantial
unanticipated costs to that plan. See McGurl v. Trucking Employees of North Jersey Welfare
Fund, Inc., 124 F.3d 471, 478 (3d Cir. 1997) (observing that “there would be substantial and
adverse fiscal consequences were a court to impose primary coverage on a plan . . . which
intended to provide . . . nominal secondary coverage for [a] group of claimants merely because
the plan provides primary coverage for certain other claimants”).
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estimated the amount that Medicare would have paid if she had visited a provider who accepted
Medicare.
III.
STANDARD OF REVIEW
“To survive a motion to dismiss, a complaint must contain sufficient factual matter,
accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 129 S.
Ct. 1937, 1949 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)); see also
Phillips v. County of Allegheny, 515 F.3d 224, 234 (3d Cir. 2008) (“[S]tating . . . a claim requires
a complaint with enough factual matter (taken as true) to suggest the required element. This
does not impose a probability requirement at the pleading stage, but instead simply calls for
enough facts to raise a reasonable expectation that discovery will reveal evidence of the
necessary element.”) (internal quotations omitted).
When considering a motion to dismiss under Iqbal, the Court must conduct a two-part
analysis. “First, the factual and legal elements of a claim should be separated. The District Court
must accept all of the complaint’s well-pleaded facts as true, but may disregard any legal
conclusions. Second, a District Court must then determine whether the facts alleged in the
complaint are sufficient to show that the plaintiff has a plausible claim for relief.” Fowler v.
UPMC Shadyside, 578 F.3d 203, 210-11 (3d Cir. 2009) (internal citations and quotations
omitted). “A pleading that offers labels and conclusions or a formulaic recitation of the elements
of a cause of action will not do. Nor does a complaint suffice if it tenders naked assertions
devoid of further factual enhancement.” Iqbal, 129 S. Ct. at 1949 (internal quotations and
alterations omitted).
IV.
DISCUSSION
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Defendants seek the dismissal of Count III of the complaint on the theory that it
impermissibly duplicates the benefits claims in Counts I and II. Defendants argue primarily that
equitable relief under § 502(a)(3) is not available because plaintiff’s alleged injuries can be
addressed in a benefits claim under § 502(a)(1)(B). Defendants specifically argue that §
502(a)(3) is a “catchall” provision that allows a plaintiff to seek “appropriate equitable relief for
injuries caused by [ERISA] violations that § 502 does not elsewhere adequately remedy.” Varity
Corp. v. Howe, 516 U.S. 489, 512 (1996). In Varity, the Supreme Court concluded that:
[§ 502(a)(3)] authorizes appropriate equitable relief. We should expect that
courts, in fashioning appropriate equitable relief, will keep in mind the special
nature and purpose of employee benefit plans and will respect the policy choices
reflected in the inclusion of certain remedies and the exclusion of others . . . .
Thus, we should expect that where Congress elsewhere provided adequate relief
for a beneficiary’s injury, there will likely be no need for further equitable relief,
in which case such relief normally would not be appropriate.
Id. at 515 (quotations and citations omitted).
In Counts I and II, plaintiff seeks unpaid benefits, interest, and clarification of his right to
future benefits based on a proper calculation of benefits. In Count III, plaintiff seeks declaratory
and injunctive relief requiring United to recalculate benefits and to pay restitution necessary to
make plaintiff whole for the reduced benefits he received. Defendants argue, citing Varity, that
to the extent that plaintiff has viable claims, § 502(a)(1)(B) provides an adequate remedy,
making § 502(a)(3) unavailable to plaintiff. Defendants’ core argument is that the relief sought
by plaintiff in Count III is not appropriate equitable relief because Congress has provided
plaintiff with an explicit remedy for the recovery of contractually-owed benefits in §
502(a)(1)(B).
Plaintiff responds that defendants’ motion is premature, because the Court has yet to
determine whether plaintiff’s claimed injuries can be adequately remedied or otherwise
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addressed through the benefits claims asserted under § 502(a)(1)(B) in Counts I and II. Plaintiff
argues that he is entitled to seek non-monetary declaratory relief pursuant to § 502(a)(3),
including relief that would define the parties’ rights and obligations and prevent the types of
breaches of fiduciary duty alleged by plaintiff. See Smith v. Medical Benefit Adm’rs Group, Inc.,
639 F.3d 277, 284 (7th Cir. 2011). Plaintiff further argues that he may seek monetary relief for a
breach of fiduciary duty by defendants under § 502(a)(3). See Cigna Corp. v. Amara, 131 S. Ct.
1866, 1880 (2011) (concluding that “for a loss resulting from a trustee’s breach of fiduciary duty,
or to prevent the trustee’s unjust enrichment” monetary relief in the form of a surcharge could
fall within the scope of the term “appropriate equitable relief” under ERISA § 502(a)(3)).
Accordingly, plaintiff contends that a proper determination of whether he is entitled to relief “for
an improper denial of benefits under ERISA § 502(a)(1)(B) or for breach of fiduciary duty under
ERISA § 502(a)(3), is a matter to be resolved after discovery.”
There is a split among circuits and within this district regarding the effect of Varity on a
plaintiff’s ability to simultaneously pursue claims for benefits under § 502(a)(1)(B) and for
breach of fiduciary duty under § 502(a)(3). Compare e.g., Zebrowski v. Evonik Degussa Corp.
Admin. Comm., 2011 U.S. Dist. LEXIS 18596, at *11-13 (E.D. Pa. Feb. 24, 2011) (“[A]t this
early stage of the litigation, a complaint in an ERISA action may contain alternative claims under
§§ 502(a)(1)(B) and 502(a)(3) . . . . Before discovery, plaintiffs should not be forced to choose
between their claims for benefits and their claims for equitable relief.”) and DeVito v. Aetna,
Inc., 536 F. Supp. 2d 523, 533-34 (D.N.J. 2008); with Stallings v. IBM Corp., 2009 U.S. Dist.
LEXIS 81963, at *28-29 (D.N.J. Sept. 8, 2009) and Chang v. Life Ins. Co. of N. Am., 2008 U.S.
Dist. LEXIS 46815, at *7-11 (D.N.J. June 17, 2008).
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The Court is persuaded by the reasoning of those courts that have found that Varity does
not establish a bright line rule precluding the assertion of alternative claims under §§
502(a)(1)(B) and 502(a)(3) at the motion to dismiss stage. However, the Court will not permit a
§ 502(a)(3) claim to duplicate the relief theories of § 502(a)(1)(B) at the appropriate stage of this
litigation. See e.g., Zebowski, 2011 U.S. Dist. LEXIS 18596, at *11, *13 (“[A]t this early stage
of the litigation, a complaint in an ERISA action may contain alternative claims under §§
502(a)(1)(B) and 502(a)(3) . . . Before discovery, plaintiffs should not be forced to choose
between their claims for benefits and their claims for equitable relief.”); DeVito, 536 F. Supp. 2d
at 533-34 (“The Court is persuaded by the reasoning of those courts that have found that Varity
does not establish a bright-line rule at the motion to dismiss stage of the case.”); Parente v. Bell
Atlantic-Pa., 2000 U.S. Dist. LEXIS 4851, at *11 (E.D. Pa. April 18, 2000) (“Instead of a brightline rule, Varity requires an inquiry into whether Congress provided adequate relief for a
beneficiary’s injury.”) (quotations omitted).
V.
ORDER
For the foregoing reasons, it is on this 22nd day of November, 2011,
ORDERED that defendants’ motion to dismiss Count III of plaintiff’s first amended
complaint is DENIED as premature at this time. Defendants may renew their argument that
Count III impermissibly duplicates the benefits claims contained in Counts I and II in a summary
judgment motion after the completion of discovery.
/s/ Faith S. Hochberg__________
Hon. Faith S. Hochberg, U.S.D.J.
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